New DoD Rule on Review, Audit, and Approval of Electronic Parts Purchases

DoD issued a final rule last week that makes contractors and subcontractors subject to approval, review and audit by DoD officials when identifying a contractor-approved supplier of electronic parts.

DoD was quick to point out however that this new rule shouldn't be too much of a burden on contractors as the review, audit, and approval of contractor-approved suppliers will generally be in conjunction with a contractor purchasing system review (CPSR) or other surveillance of purchasing practices by the contract administration office. However, if the Government has credible evidence that a contractor-approved supplier has provided counterfeit parts, it can, and will initiate a separate review, audit, and approval.

This new process relate only to electronic parts that are not in production by the original manufacturer or an authorized aftermarket manufacturer and that are not currently available in stock from the original manufacturer, their authorized suppliers, or suppliers that obtain such parts exclusively from the original manufacturers.

Contractors have already been required to establish counterfeit electronic part detection and avoidance systems under DFARS 252.246-7007 (if that clause is included in a DoD contract) as part of their established purchasing systems. Any deficiencies in a purchasing system, including counterfeit electronic parts, will impact across the board to all contracts.

For contractors that already have approved purchasing systems, the prior approval remains in effect. That approval remains in effect for three years. After three years, the purchasing system is no longer approved. The status is listed as "not applicable" which means it is neither approved nor disapproved. It seems likely that such systems would have an increased chance of being subjected to review, audit and approval of electronic parts purchases.

To read more about the new rule, click here.